Uber for real estate? feeDuck aims to save money on agent commission
Selling a house is a daunting task, but a new Canadian website aims to cut the costs and save time by offering a significant cut in realtor commission–connecting you with real estate agents who “bid down” for your business. It’s a system that the founders say have saved Canadians $1.5 million since January, and a potential innovation to an industry one marketing expert said is “primed for a shake-up.”
The idea for feeDuck took shape two years ago when Sharn Kandola moved into a new Oakville, Ont. neighbourhood, and met three other neighbours–her future business partners.
“Our neighbourhood was turning over and we all moved in within a year,” said Kandola. “We were having beers in the backyard, and we started talking about, ‘how was your agent?’ … We started talking about the difference in commission, and we thought, ‘well there’s got to be an easier way to do this.’ People want a good agent, but they want to save money, too.”
FeeDuck asks sellers for a few details about the home they are listing, including postal code, square footage, number of beds and bathrooms and type of home (i.e. detached, semi-detached, etc.). The company calls the seller to verify their details, then sends an email to real estate agents who specialize in the area.
Over the next 24 hours, real estate agents will “bid down” your commission in a kind of reverse real-time auction, and feeDuck will make an e-introduction between the seller and the lowest-bidding agent.
It’s free for homeowners, and while feeDuck asks that the homeowner meet with the winning agent, there’s no obligation to sign with them.
“The real estate industry is primed for a shake-up,” said McMaster University marketing and entrepreneurship assistant professor Marvin Ryder in an email to Global News.
“Uber shook up taxis. Airbnb shook up hotels. Various online brokers shook up stock purchasing. Various other online companies shook up airline, hotel, and car rentals. But, to date, the real estate industry has seemed immune to innovation.”
Ryder suggested in difficult real estate markets, there’s a feeling that agents “earn” their commission through promoting the home, but when there’s a hot market—and a house is listed and then sold within a week, often for more than its asking price—people do not feel the agent earns the commission.
“That is when innovation happens to either change the role or eliminate a middleman,” he said.
Though he pointed to www.comfree.com (a company that charges 0 per cent commission but does charge a flat fee for selling your home) and www.onepercentrealty.com (a company that charges 1 per cent commission plus a $900 flat fee for selling your home), Ryder said he hasn’t seen feeDuck’s “bidding down” process used this way before.
University of Toronto Rotman School of Management professor of marketing Avi Goldfarb called feeDuck an “intriguing idea.”
“One key challenge for the platform is a ‘chicken-and-egg’ type problem: Getting both homeowners and agents to participate without having critical mass on one side or the other,” said Goldfarb in an email to Global News. “A second key challenge is to make sure that the lowest bidders are still high quality agents.”
Ryder also questioned the efforts of agents earning very low commission, suggesting a minimum price may translate to a minimum effort to sell your home.
“The consumers who succeed will likely have very desirable homes, in a great state of maintenance in area of great demand. In that case, where the houses almost sell themselves, an agent could well be glad to lower the commission to get more houses to sell [since] volume of sales can trump revenue per sale.”
Kandola said agents pay to use the service, but she’s turned many agents away who don’t have a “good track record.” She said the site’s pre-vetted realtors are from well-known groups such as ReMax, Sutton Group, and Century 21.
“With us, you get the same great agent you’d normally get, but at a reduced rate,” she said. “Homeowners are thrilled because we’re saving them literally thousands of dollars.”
Kandola said the agent who wins the auction will pay a $170 administrative fee, which she suggested is less than the marketing expenses many pay out of pocket.
“We know commission rates are high, five to six per cent in some areas, but agents spend thousands of dollars on marketing in areas with buses, billboards, trying to get the homeowner at the exact moment they’re ready to sell. But we’re the ones who know there’s a homeowner ready to sell.”
“At the end of the day, if they get a ‘for sale’ sign on somebody’s lawn, there’s no better advertising than that.”
Goldfarb suggested the benefit of the site may be smaller for real estate agents with established reputations and long client lists, but larger for new agents trying to build a business, in which case “the additional leads might prove valuable.”
Watch below: A video created by the company on how feeDuck.com works to connect homeowners with real estate agents at the lowest price possible.
A statement from the Canadian Real Estate Association (CREA) said more than 100,000 realtors compete against each other to represent sellers and buyers in Canada.
“CREA is aware of the offering [feeDuck.com], but we have no opinion on this or on any other specific business model,” said spokesperson Pierre Leduc in an email to Global News.
Kandola pointed out the service is also good for people who aren’t comfortable negotiating in person, or who don’t have time to research agents themselves.
FeeDuck launched in the Toronto area in January, but has since expanded to other major Canadian cities including Calgary, Edmonton, Vancouver, Victoria and Regina. She said they’re trying to spread the word and building up the real estate agent database so that more homeowners will be able to try the site.
“We are doubling our agent and homeowner base every month,” she said, declining to provide specific numbers of users in Alberta. “We have multiple bids on every property which always drives down the rate, and that is always great for home sellers.”
Kandola said the company has a list of “inquiring investors” and also plans to create an app in the future.
Ryder suggested this kind of site is most successful in hot markets when house prices are “flying” and selling doesn’t take long. When markets are cool, he said, people see more value in the work of real estate agents.
“The other key to success will be sharing success stories,” he said. “You can wait for people to tell others (word of mouth) but that can take a long time.”
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